"Why Smart People Are Stupid" and Other Revelations About the Brain

One of the best books that I read recently is Nobel Prize winner Daniel
Kahneman's "Thinking,
Fast and Slow". You'll find a lot of reviews of the book online (e.g.,
Jim Holt at the NYT), but the best thing to do would be to pick up a copy of
the book and read it (Sci Am has
reprinted a portion recently). As one of the reviewers in Amazon.com, Adam
Smythe,
wrote [all bold text in this post is my emphasis]:

Daniel Kahneman, the author of this exceptional book, and Amos Tversky
(who died in 1996) made economics and other disciplines a lot more
realistic--and tougher--for economists, researchers and students. Prior to
their work, economists and others maintained classical theories and
explanations that relied on certain seemingly logical assumptions about
human behavior. However, people don't always behave the way logic might
suggest, for a variety of reasons that Kahneman (and Tversky) explained,
starting in the 1970s. Today, the subject of behavioral decision-making
is one of the more exciting ones in fields like economics, finance, medicine
and even law, thanks to their pioneering work. In recognition of the impact
of his work in economics, Kahneman, a cognitive psychologist and professor
emeritus at Princeton, won the Nobel Prize in Economics in 2002,
specifically for his work on prospect theory.

The title of this book comes from Kahneman's discussion of two simple models
of how people think. "System 1" thinking corresponds to fast, intuitive,
emotional and almost automatic decisions, though it sometimes leaves us at
the mercy of our human biases. "System 2" thinking is more slow-going and
requires more intellectual effort. To nobody's surprise, we humans are more
likely to rely on System 1 thinking, because it saves us effort, even if it
can lead to flawed thinking.

Andrew Revkin at Dot Earth (NYT)
posted the video a recent talk by Kahneman and added:

Last week, Jonah Lehrer at The New Yorker, mentioned Kahneman's work and
wrote about another recent study whose implications are important in a post
titled "Why
Smart People are Stupid". Here are some relevant extracts from Lehrer's
piece, but go read his entire post:

For more than five decades, Daniel Kahneman, a Nobel Laureate and
professor of psychology at Princeton, has been asking questions like this
and analyzing our answers. His disarmingly simple experiments have
profoundly changed the way we think about thinking. While philosophers,
economists, and social scientists had assumed for centuries that human
beings are rational agents—reason was our Promethean gift—Kahneman, the late
Amos Tversky, and others, including Shane Frederick (who developed the
bat-and-ball question), demonstrated that we’re not nearly as rational as we
like to believe.

When people face an uncertain situation, they don’t carefully evaluate
the information or look up relevant statistics. Instead, their decisions
depend on a long list of mental shortcuts, which often lead them to make
foolish decisions. These shortcuts aren’t a faster way of doing the
math; they’re a way of skipping the math altogether. Asked about the bat and
the ball, we forget our arithmetic lessons and instead default to the answer
that requires the least mental effort.

Although Kahneman is now widely recognized as one of the most influential
psychologists of the twentieth century, his work was dismissed for years.
Kahneman recounts how one eminent American philosopher, after hearing about
his research, quickly turned away, saying, “I am not interested in the
psychology of stupidity.”

The philosopher, it turns out, got it backward. A
new study in the Journal of Personality and Social Psychology led
by Richard West at James Madison University and Keith Stanovich at the
University of Toronto suggests that, in many instances, smarter people are
more vulnerable to these thinking errors. Although we assume that
intelligence is a buffer against bias—that’s why those with higher S.A.T.
scores think they are less prone to these universal thinking mistakes—it can
actually be a subtle curse.

[...]

The results were quite disturbing. For one thing, self-awareness was
not particularly useful: as the scientists note, “people who were aware of
their own biases were not better able to overcome them.” This finding
wouldn’t surprise Kahneman, who admits in “Thinking, Fast and Slow” that his
decades of groundbreaking research have failed to significantly improve his
own mental performance. “My intuitive thinking is just as prone to
overconfidence, extreme predictions, and the planning fallacy”—a tendency to
underestimate how long it will take to complete a task—“as it was before I
made a study of these issues,” he writes.

Perhaps our most dangerous bias is that we naturally assume that everyone
else is more susceptible to thinking errors, a tendency known as the “bias
blind spot.” This “meta-bias” is rooted in our ability to spot systematic
mistakes in the decisions of others—we excel at noticing the flaws of
friends—and inability to spot those same mistakes in ourselves. Although
the bias blind spot itself isn’t a new concept, West’s latest paper
demonstrates that it applies to every single bias under consideration, from
anchoring to so-called “framing effects.” In each instance, we readily
forgive our own minds but look harshly upon the minds of other people.

And here’s the upsetting punch line: intelligence seems to make things
worse.

The so-called bias blind spot arises when people report that thinking
biases are more prevalent in others than in themselves. Bias turns out to be
relatively easy to recognize in the behaviors of others, but often difficult
to detect in one's own judgments. Most previous research on the bias blind
spot has focused on bias in the social domain. In 2 studies, we found
replicable bias blind spots with respect to many of the classic cognitive
biases studied in the heuristics and biases literature (e.g., Tversky &
Kahneman, 1974). Further, we found that none of these bias blind spots were
attenuated by measures of cognitive sophistication such as cognitive ability
or thinking dispositions related to bias. If anything, a larger bias blind
spot was associated with higher cognitive ability. Additional analyses
indicated that being free of the bias blind spot does not help a person
avoid the actual classic cognitive biases. We discuss these findings in
terms of a generic dual-process theory of cognition

This has particularly grim implications for a society that thinks it is a
meritocracy
but is really an oligarchy, because the competitively educated people at
the top believe (incorrectly) that they don't need to have their intuitions
reviewed by lesser mortals.

Hayes goes on to interview various Wall Street titans and hedge fund
managers, and gets their own account of how they feel that they are innately
superior -- the smartest guys in the room -- and how great it is that the
nation takes its cues from them.